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How safe is your money? /Blanchard and company July
22, 2008
What the IndyMac bank failure means
It has always been assumed that if your money
was in the bank, it was safe. Right now, that is not necessarily
the case. Panic has ensued and there are not many "safe
assets" where your money can be.
As loan defaults mount and home prices continue
to fall, US regulators are preparing for other banks in America
to fail. This has led Wall Street analyst to ask themselves:
How many will fail and who will be next?
Over the weekend, one of these questions was
answered. IndyMac Bancorp Inc., a bank who specialized in
risky mortgages, became the latest casualty of the subprime
mortgage crisis, as federal regulators shut down the troubled
savings bank in the largest U.S. bank failure since 1984.
The bank had total assets of around $32 billion at the end
of the 1st quarter.
Regulators said the immediate cause of IndyMac's
failure was a deposit run in recent days that began after
a June 26 letter to the FDIC from New York Senator Charles
Schumer was made public. By July 10, depositors had pulled
more than $1.3 billion from their accounts.
Most of the bank's clients, around 265,000,
have deposits that are insured by the FDIC. However, there
were over 10,000 clients who had roughly $1 billion dollars
in deposits that will not be insured. These clients have deposits
that exceeded the $100,000 maximum that is covered by the
FDIC.
These clients will have to stand in line with
all of the other creditors that the bank owes money to or
they can take what the FDIC will offer them, which will be
50 cents on the dollar. Essentially, these clients lost
half of their money literally over night.
It is time to check where your money is and
consider diversifying your assets now.
Precious metals and rare coins are assets
that have proven to help investors preserve and build their
wealth. While others wait in line to check on their overall
wealth, you can rest assure that these assets from Blanchard
and Company, Inc. will help your overall portfolio.
In today's uncertain market, people are motivated
by fear. Making a run on a bank could happen at any bank in
the country, all there has to be is a rumor that the bank
is failing and people will line up to take money out. Once
the panic ensues, there is no stopping it, just ask Indymac.